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Airborne 12.09.16

BTS Releases Fourth-Quarter 2006 System Airline Financial
Data

A group of 21 selected passenger airlines reported a system
operating profit margin of 2.6 percent in the fourth quarter, down
from the third quarter but the largest fourth-quarter profit margin
for this group since 1999, the Bureau of Transportation Statistics
(BTS) of the USDoT reported Monday in a release of preliminary
data. The 21-carrier group consists of the seven largest network,
low-cost and regional carriers based on operating revenue.

BTS, a part of the Research and Innovative Technology
Administration, reported that the profit margin in the
October-to-December period was the third consecutive quarter with a
profit margin for the group. The group of regional carriers
reported an operating profit margin of 10.0 percent, the network
carrier group reported a 1.7 percent margin and the low-cost
carriers reported a 2.7 percent profit margin. Operating margin
measures profit or loss as a percentage of the airline’s
total operating revenue.

This release consists of domestic plus international, or system,
financial reports for the airlines.

The network
group’s profit margin of 1.7 percent in the fourth quarter
was a 9.0 percentage point improvement from the 7.3 percent loss
margin in the fourth quarter of 2005. The seven network carriers
reported a combined operating profit of $393 million in the fourth
quarter for the group’s third consecutive quarterly profit
margin. In the fourth quarter of 2005, the seven network
carriers’ operating loss was $1.6 billion.

The low-cost group’s profit margin of 2.7 percent in the
fourth quarter was a 0.9 percentage point improvement from a 1.8
percent profit margin in the fourth quarter of 2005. The seven
carriers reported a combined $131 million operating profit in the
fourth quarter of 2006.

The regional group’s profit margin of 10.0 percent profit
margin in the fourth quarter was a 1.1 percentage point improvement
from the 8.9 percent profit margin in the fourth quarter of 2005.
The seven regional carriers reported a $245 million operating
profit in the fourth quarter of 2006.

The top operating profit margins were reported by regional
carriers Atlantic Southeast Airlines, Pinnacle Airlines and
American Eagle Airlines. US Airways reported the top profit margin
of the network carriers. Low-cost carriers America West Airlines,
Frontier Airlines, ATA Airlines and Spirit Airlines reported the
largest operating loss margins. The only other carriers to report
operating loss margins were network carriers Delta Air Lines and
Alaska Airlines.

America West and US Airways report financial data separately
because the carriers hold two operating certificates despite the
merged business operations. They will file a merged financial
report beginning with the second quarter of 2007.

Network carriers operate
a significant portion of their flights using at least one hub where
connections are made for flights on a spoke system. Low-cost
carriers are those that the industry recognizes as operating under
a low-cost business model, with fewer infrastructure costs and
greater expectations of productivity. Regional carriers provide
service from small cities, using primarily regional jets to support
the network carriers’ hub and spoke systems. The selected
groups consist of the seven carriers in each group with the highest
reported revenue in the most recent 12-month period.

All three carrier groups reported higher or the same unit
revenues compared to the fourth quarter of 2005 with the network
airlines registering the biggest gains at 0.7 cents per available
seat-mile (ASM). The regional carriers reported the highest unit
revenues in the fourth quarter at 15.0 cents per ASM. Network
carriers’ unit revenues were 13.5 cents per ASM followed by
the low-cost carrier group at 9.8 cents per ASM.

The highest unit revenues were reported by regional carriers
Comair and American Eagle and network airline US Airways. The
lowest unit revenues were reported by low-cost carriers JetBlue
Airways, Spirit and ATA.

Only the low-cost group reported higher unit costs than in the
fourth quarter of 2005, reporting an increase of 0.3 cents per ASM.
The regional carriers reported the highest unit costs in the fourth
quarter at 13.5 cents per ASM. Network carriers’ unit costs
were 13.2 cents per ASM followed by the low-cost carriers at 9.5
cents per ASM.

The carriers with the highest unit costs were network airline US
Airways and regional airlines Comair and American Eagle. The
carriers with the lowest unit costs were low-cost carriers JetBlue,
Southwest Airlines and ATA.

The regional airlines reported the highest average passenger
yield at 19.7 cents per revenue passenger-mile (RPM) but the
regionals were the only group to report lower passenger yields than
in the fourth quarter of 2005. The network carriers at 12.3 cents
per RPM and the low-cost carriers at 12.1 cents per RPM both
reported yield gains over the fourth quarter of 2005. Passenger
revenue yield measures passenger revenues against total travel by
dividing passenger revenues by RPMs.

The top passenger revenue yields were reported by regional
carriers American Eagle, Comair and Atlantic Southeast. The lowest
passenger revenue yields were reported by low-cost carriers
JetBlue, Spirit and Frontier. US Airways reported the highest
revenue yield of any network carrier.